Family Dollar profits up from expansion, sales

By Don Hogsett -- Home Textiles Today, 1/8/2001 12:00:00 AM

MATTHEWS, NC -Fueled by rapid expansion and a double-digit increase in sales, first-quarter profits at Family Dollar Stores climbed by 13.3 percent, to $41.5 million from $36.6 million last year.

Sales in the opening quarter rose by 14.9 percent, to $820.1 million from $713.5 million, lifted by a net gain of 128 new stores. The neighborhood-oriented discount chain opened 138 new stores during the period, while closing 10 others. The crucial gauge of same-store sales registered a big disappointment, rising just 4.6 percent, the retailer said, stunted by the double whammy of severe winter weather and a halting economy.

Breaking out its fourth-quarter results, the chain said same-store sales of soft lines, including home textiles, declined by 6.7 percent, while hard lines sales were up 9.1 percent.

"The average transaction increased approximately 2.5 percent, to $8.27, and the customer count, as measured by the number of register transactions in existing stores, increased approximately 2 percent," according to the company.

Howard Levine, president and ceo, said the record quarterly sales and profits reflect continued strong customer response to a new merchandising strategy that plays up hard lines and consumables at the expense of soft lines and apparel. The new strategy, said Levine, includes "the introduction of more hard lines consumables in departments such as household chemicals, paper products and food. To make room for additional consumables and other hard lines categories, the company reduced space allocated to hanging apparel by about 15 percent to 20 percent. The space reallocation program began in May 2000 and was completed in October 2000."

Levine said the double-digit growth in earnings came despite additional costs rung up to complete the space reallocation program and to open the record 138 new units, compared with the opening of just 78 stores in the same period a year ago. "The additional costs more than offset the savings from the elimination of an advertising circular," said Levine, with operating costs measured as a percentage of sales ticking up 10 basis points, to 26.7 percent.

Looking forward, the 3,833-unit chain will continue its rapid expansion, said Levine, opening 500 new stores in 2001, and closing about 50 others.

FAMILY DOLLAR STORES INC.